ii Super 60 performance review 2021

Find out how interactive investor’s rated funds performed.

ii Super 60 fund selections

If 2020 was all about how well China and the Asian economies coped with the Covid pandemic which saw their stock markets emerge as the winners, 2021 was a year, once again, in which stock market returns were dominated by the outperformance of US Equities, with the S&P 500 up almost 30% in Sterling terms.

Chinese equities, in contrast, were hampered by a series of negative news stories, including the government’s announcement of a tightening up of regulation in a number of industries and news of the debt crisis around property developer Evergrande (SEHK:3333). Both issues had a negative impact on stock market returns and led to a decline of around 22% in Chinese Equities.

Despite the negative news flow surrounding China, the Mobius Investment Trust (LSE:MMIT) was the top-performing fund on the ii Super 60 list, delivering a price return of almost 42% to investors. This included the fund benefiting from the narrowing of the discount from around 6% at the start of the year to 0% by year-end. The fund managers focus their efforts on investing in companies that are not well researched by the market, with the businesses often not well understood, which in their opinion leads to mispriced share prices. The portfolio is consequently biased to mid and small-cap names and is run as a high conviction portfolio of around 28 holdings, with the top five accounting for as much as 40% of the total. While technology stocks account for around 34% of the portfolio, the focus on smaller companies means that the fund avoided the issues that hampered the returns of industry behemoths such as Alibaba (NYSE:BABA) and Tencent (SEHK:700), which were hard hit by the regulatory clampdown.

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Elsewhere, the BMO Commercial Property Trust (LSE:BCPT) (37.8%) and the iShares Global Property Securities Index fund (28%) were also among the top-performing funds on the list as the property sector, which was one of the hardest hit in 2020, started to recover from the slowdown caused by the Covid-induced global pandemic. The return of the BMO fund was, however, also significantly enhanced by the narrowing of the discount on which the trust returns, with the underlying portfolio delivering a return of 14.5%

In keeping with the outperformance of US Equities, the Jupiter Merian North American Equity fund (27.8%) was also among the five best-performing funds.

Rounding off the list of the five strongest-performing funds was the WisdomTree Enhanced Commodity ETF (LSE:WCOB), which was up around 28%. The fund, which provides investors with commodity exposure to four broad commodity sectors, namely energy, agriculture, industrial metals and precious metals, benefited from the strong performance of the energy sector, which was up 41% over the year and which makes up for around 34% of the fund’s assets.

While Japanese markets were unable to capitalise on the strong returns delivered in 2020, they were up slightly. However, highlighting the fact that the performance of Active funds is often largely impacted by the manager’s stock selection, three of the bottom five funds were Japanese Equity funds; Lindsell Train Japanese Equity(-19.1%), Baillie Gifford Shin Nippon (LSE:BGS) (-17.23%) and FTF Martin Currie Japan Equity (-16.3%) with all three posting double-digit negative returns. In the case of the Baillie Gifford fund, this included a narrowing of the fund’s premium as the underlying investments were down 10.3%.

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The manager of the Lindsell Train Japanese Equity fund adopts a long-term approach and takes high conviction bets in a limited number of companies. To this end, the fund’s holding in Obic Business Consultants, a top five position in the fund with a holding in excess of 7%, fell materially over the course of the year and was the single largest stock detractor in the portfolio. The fund’s manager Michael Lindsell was surprised by the poor performance of the fund’s share price and noted in his newsletter to investors, that "Just as baffling is the performance of the portfolio’s other big holding in a tech enabled business, Obic Business Consultants. It was down 28% even though its half-year sales were up a greater than expected 18% and operating profits up 28%." The concentrated nature of the fund is also manifested at the sector level where the fund’s 45% allocation to the consumer staples sector was another significant detractor from performance, as was stock selection in this sector.

The small-cap nature of the FTF Martin Currie Japan Equity fund has always resulted in a volatile return profile with returns generally deviating quite significantly from those of the benchmark.

Baillie Gifford Shin Nippon is another example of a fund which featured among the strongest performers in 2020 but experienced a reversal of this trend in 2021. The fund, which seeks to invest in innovative companies with the ambition of being disruptors in their areas of operation, saw returns stall against the backdrop of the ongoing uncertainty brought about by the Covid-pandemic.

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In another reversal from last year’s trend, Fidelity China Special Situations (LSE:FCSS) (-17.5%), which was one of the strongest performers in 2020, was one of the weakest funds in 2021 and was unable to escape the woes which befell the Chinese market as highlighted above.

Finally, rounding off the list of the weakest performers is the Fidelity Asia fund (-6.2%). The manager adopts a bottom-up approach and seeks to invest in quality growth firms with strong business models, good management and prudent accounting policies. While this approach has served the fund well over the long term, the quality bias was not as helpful in 2021, with the market oscillating between stocks that were trading on very low valuations or companies that had very strong growth profiles.

Top five ii Super 60 funds in 2021

Source: Morningstar. Total returns in GBP as at 31/12/21

Bottom five ii Super 60 funds in 2021

Source: Morningstar. Total returns in GBP as at 31/12/21

Most-bought Super 60 funds in 2021

Changes to the ii Super 60 list (under review/developments) in 2021

• CFP SDL UK Buffettologyput under formal review due to concerns around resource and size of assets. The fund is an adventurous option in our UK equities asset group. We will make a final decision in the upcoming annual review of the Super 60. (16 November 2021)
• TM CRUX European Special Situations put under formal review due to performance concerns. The fund is an adventurous option in our European equities asset group.  We will make a final decision in the upcoming annual review of the Super 60. (16 November 2021)
• WisdomTree Enhanced Commodity ETF (LSE:WCOB) added as a Low Cost Specialist option. (4 May 2021)

Inclusion of six new investments and two removals (11 January 2021)

• Vanguard FTSE All-World High Dividend Yield ETF (LSE:VHYL) as Low Cost Global Equity Income option
• iShares Global Property Securities Index as Low Cost Property option
• Diverse Income Trust (LSE:DIVI) as UK Equity Income Smaller Company option
• FTF ClearBridge Global Infrastructure Income as an Alternative Core option
• Capital Gearing (LSE:CGT) as Mixed Assets Core option
• Fidelity Multi-Asset Income as Mixed Assets Income option
• SPDR® S&P Global Dividend Aristocrats ETF (LSE:GBDV) removed from the Low Cost Global Equity Income category due to higher risks attached to this strategy.
• North American Income Trust (LSE:NAIT) removed following an extended period of unsatisfactory performance.
• JPMorgan European Income (LSE:JETI) (income shares) retained. We decided to maintain our rating and remove the trust from under formal review.

Click here to read the rationale for changes to the Super 60 list in 2021 and all other reviews.

Super 60 videos in 2021

Fundsmith Equity interview (published in March 2021)

• Terry Smith on Warren Buffett and how to find good companies
• Terry Smith talks fund size and running Fundsmith from Mauritius
• Terry Smith: three shares I bought and why
• Terry Smith: your questions answered
• Terry Smith: my view on tech shares, and why it's not too late to buy
• Revealed: Terry Smith’s succession plan for Fundsmith

ASI Global Smaller Companies fund (published in March 2021)

• Five of my favourite smaller company shares
• Three smaller company tech names with great potential

Henderson Smaller Companies Investment Trust (published in April 2021)

• Five UK shares I have held for nearly two decades
• How we find growth at a reasonable price and three stock picks

Guinness Asian Equity Income (published in May 2021)

• How I find high-quality dividend shares
• Three under-the-radar dividend stalwarts

Premier Miton US Opportunities (published in July 2021)

• US results season forecasts and latest trades
• A top fund that loves these dull and boring stocks

TR European Growth Trust (published in September 2021)

• How to find undervalued growth companies and latest buys
• The turnaround shares this top fund performer is backing

Mobius Investment Trust (published in October 2021)

• Mobius: why you write off Chinese stocks at your peril
• Mobius: make big money in emerging markets

Jupiter Merian North American Equity (published in November 2021)

• Why I’m buying ‘value’ stocks and other top tips
• Ian Heslop's outlook for the US stock market in 2022

JPMorgan Emerging Markets investment trust (published in December 2021)

• Shares I've owned for over a decade and lessons learned
• Why I’d still buy Chinese stocks despite crackdowns

Diverse Income Trust (published in December 2021)

• Gervais Williams: three overlooked shares I’m finding value in
• Gervais Williams: my four dividend stocks for 2022

Capital Gearing (published in December 2021)

• Peter Spiller: my trust bargain idea, and secrets to outperformance
• Peter Spiller: the biggest risks for markets in 2022